|
Conventions
Debits are keyed as positive numbers and credits are keyed as negative numbers.
Expense accounts are normally debits. Example: $100 (expense incurred)
Revenue accounts are normally credits. Example: -$100 (revenue earned)
Asset accounts are normally debits. Example: $100 (money in bank)
Liability accounts are normally credits. Example: -$100 (money owed)
Initial Entry of Opening Balances
This example shows a company starting Pilot ERP midway through the year.
Description: To record initial opening balances
$2000
|
Salary
|
Salary expense this year
|
-$3000
|
Sales
|
Sales revenue this year
|
-$1000
|
Retained Earnings
|
Prior years revenue $5000 and expenses $4000
|
$1900
|
Bank
|
Money in the bank
|
-$100
|
Accounts Payable
|
Money owed by your company to vendors
|
$200
|
Accounts Receivable
|
Money owed to your company by customers
|
See Getting Started for more info on entry of opening balances.
Bank Charges and Interest
Description: To record bank charges and interest
$15
|
Bank Charges
|
Bank Charges expense account increased
|
$50
|
Misc Income and Expense
|
Interest charged: expense account increased
|
-$10
|
Misc Income and Expense
|
Interest earned: expense account decreased
|
-$55
|
Bank
|
Bank asset account is decreased
|
Corrections and Adjustments to Previous GL Transactions
This example corrects an error originally keyed on an AP invoice.
Description: To correct allocation of AP invoice no. 12345
-$10
|
Electricity
|
Incorrect expense account is decreased
|
$10
|
Office Supplies
|
Correct expense account is increased
|
Cost of Goods Sold (automatically created by AR system)
This records the cost of inventory sold (regardless of the price paid by the customer).
Description: To record cost of goods sold
$100
|
Cost of Goods Sold
|
Expense account is increased
|
-$100
|
Inventory
|
Inventory asset account is decreased
|
Depreciation
Description: To record depreciation
$100
|
Depreciation
|
Depreciation expense account is increased
|
-$100
|
Accumulated Depreciation
|
Balancing entry: credit to liability account
|
Purchase of Foreign Currency
The balance in your foreign currency bank account is low, so you transfer funds from your domestic currency account.
This example shows a Canadian company purchasing $200 US dollars for $280 Canadian.
Description: To record the purchase of US funds
-$280
|
Canadian Bank
|
Canadian Bank GL account is decreased
|
$200
|
US Bank
|
US Bank GL account is increased
|
$80
|
Gain/Loss Foreign Exchange
|
Balancing entry: expense account
|
Foreign Currency AP, AR, and Bank Balances Conversion to Domestic Currency
Done each month-end before printing statements via automatically reversing JVs.
This example shows a Canadian company converting a $200 US bank balance to $260 Canadian (exchange rate is 1.3).
Description: To convert US bank balance to Canadian for reporting purposes
$60
|
US Bank
|
Balance of Bank GL account X (exchange rate - 1)
|
-$60
|
Gain/Loss Foreign Exchange
|
Opposite side of above entry: -$60 expense
|
This will convert the balance in a foreign payables GL account using today's exchange rate of 1.3 (in this example the balance of the AP GL account was -$100). The financial statements show the total liability by combining the balances of the exchange on foreign payables and foreign payables accounts.
Description: To convert US payables to Canadian for reporting purposes
-$30
|
Exchange on Foreign Payables
|
Balance of AP GL account X (exchange rate - 1)
|
$30
|
Gain/Loss Foreign Exchange
|
Opposite side of above entry: $30 expense
|
This will convert the balance in a foreign receivables GL account using today's exchange rate of 1.3 (in this example the balance of the AR GL account was $100). The financial statements show the total asset by combining the balances of the exchange on foreign receivables and foreign receivables accounts.
Description: To convert US receivables to Canadian for reporting purposes
$30
|
Exchange on Foreign AR
|
Balance of AR GL account X (exchange rate - 1)
|
-$30
|
Gain/Loss Foreign Exchange
|
Opposite side of above entry: -$30 expense
|
Accounts Payable Invoice (automatically created by AP system)
This example shows a Canadian company purchasing office supplies for $100 US dollars.
Description: AP Invoice 12489 for Acme Supplies (1001)
$130
|
Office Supplies
|
Expense account is increased
|
-$100
|
Accounts Payable
|
Liability account is increased (credit)
|
-$30
|
Gain/Loss Foreign Exchange
|
Balancing entry: expense account decreased (credit)
|
Accounts Payable check (automatically created by AP system)
This example shows a Canadian company issuing a check for $100 US dollars.
Description: AP check 25825 for Fast Courier (1002)
-$100
|
US Bank
|
Bank asset account is decreased (credit)
|
$100
|
Accounts Payable
|
AP liability account is decreased (debit)
|
Accounts Receivable Invoice (automatically created by AR system)
This example shows a Canadian company selling goods for $100 US dollars.
Description: AR Invoice 10005 for ABC Wholesale (1002)
-$130
|
Sales
|
Revenue account is increased (credit)
|
$100
|
Accounts Receivable
|
AR asset account is increased (debit)
|
$30
|
Gain/Loss Foreign Exchange
|
Balancing entry: expense account increased (debit)
|
Accounts Receivable Payment (automatically created by AR system)
This example shows a Canadian company recording a payment for $100 US dollars.
Description: AR check 57894 for ABC Wholesale (1002)
$100
|
US Bank
|
Bank asset account is increased (debit)
|
-$100
|
Accounts Receivable
|
AR asset account is decreased (credit)
|
|